Key facts
- Short-term interest-rate futures indicate a greater likelihood of a Federal Reserve rate hike by September.
- Market expectations have shifted towards a tightening of monetary policy rather than a pause.
- The dollar experienced its largest surge in three months following signals from Federal Reserve officials.
- Rob Kaplan suggested the Fed might need to raise rates as early as September if inflation remains elevated.
Short-term U.S. interest-rate futures are now pricing in a greater chance that the Federal Reserve will deliver a rate hike by September, rather than keeping rates at their current level. This shift in market-based rate-path expectations follows the Fed's recent decision to hold rates steady, though a significant portion of policymakers anticipate a hike by the end of 2026 to combat inflation. The dollar experienced its largest surge in three months following signals from Federal Reserve officials indicating increased support for interest-rate hikes within the current year. Rob Kaplan, vice chairman at Goldman Sachs and former Dallas Fed president, stated that the Federal Reserve might need to increase interest rates as early as September if inflation stays high.